Internet stocks were rebounding somewhat in mid-afternoon trading Friday, but the blue chips were dragged down by a big sell-off of IBM, which disappointed investors despite a healthy earnings report.
Meanwhile, the market was buzzing about the possibility of AT&T selling off its Internet assets to At Home -- a move with all sorts of intriguing elements, especially in light of the fact that AT&T will soon become a major shareholder in the cable-based access provider.
The Dow Jones Industrial Average fell 131.31 points to 9132.77, and the Wired Index was 5.82 lower at 591.96. The Nasdaq Composite Index shed 3.55 to 2341.17, and the S&P 500 was down 9.04 at 1226.12.
Much of the Dow's decline stemmed from IBM (IBM) tumbling US$15.63 to $181.38 as traders digested a drop in fourth-quarter computer sales. Still, Big Blue reported profit of $2.47 a diluted share, which was a couple of pennies ahead of expectations, and up 12 percent from a year before. The worry for investors is that IBM will lose market share as PC prices keep falling. This prompted Morgan Stanley Dean Witter to lower its rating for the company's stock to "outperform" from "strong buy."
IBM doesn't get all the blame, though. Wall Street also was spooked by continued economic turmoil in Brazil, where an attempt by the country's central bank to prop up the local currency proved fruitless. There's speculation as well that China is on the verge of devaluing its own currency, which would likely undermine Japan's efforts to resuscitate its code-blue economy, which would ... well, it wouldn't be good.
But enough gloom and doom. Let's wheel and deal.
The Wall Street Journal quoted the ubiquitous "people familiar with the situation" -- they do get around -- as saying AT&T (T) is mulling a sale of its Internet properties, including its WorldNet service, to At Home (ATHM) for $1 billion in stock. If true, the deal would follow At Home shelling out approximately $7 billion for Excite, not to mention AT&T's almost $41 billion acquisition of Tele-Communications Inc.
TCI holds a major stake in At Home, so, once all the corporate dust settles, AT&T would end up with much of its current resources intact, and plenty more besides.
"This would definitely be in the best interests of AT&T," said Eric Melloul, an analyst with Argus Research. "They can still bundle their Internet products with their other services. Whether At Home is a separate product or a part of AT&T, it's all the same for customers."
He added that federal regulators are expected to give their go-ahead to the TCI buyout by this spring, paving the way for AT&T's deal with At Home by summer. The telco slipped 19 cents to $87.88, and At Home was up $5.13 at $102.50.
Excite (XCIT), for its part, gained $4.50 to $90.38 after reporting a quarterly net loss of 11 cents a share, which was in line with the Street's expectations. The portal also said its traffic in December increased 15 percent from September to 58 million page views a day. Rival Lycos (LCOS), soon-to-be parent of Wired News and the object of considerable merger speculation, slipped $4.31 to $112.69.
Guess what? Another Net-related company went through the roof on its first day of trading. Allaire (ALLR), a maker of software for Web-site development, more than doubled to $40.75 after its 2.5 million shares debuted at $20 each. The day traders were all over this puppy, no doubt relieved to have something new to throw back and forth after some pretty downcast sessions.
Further consolidation among satellite broadcasters: Hughes Electronics' DirecTV is purchasing its closest competitor, Primestar, for about $1.8 billion. The deal will give DirecTV increased channel capacity plus 2.3 million new customers, and follows DirecTV's earlier acquisition of US Satellite Broadcasting for approximately $1.3 billion. Hughes (GMH), a unit of General Motors, was $1.88 higher at $46.63.
Speaking of TV, have you ever noticed that whenever a network shows something halfway decent, they always call it an "event?" Maybe that's what comes with having hundreds of channels to watch. The general level of quality drops so low, it really is a special occasion when there's actually something good on.
Just a thought.
